Financing Boost for Kenya’s Small Farmers

The cost of food is rising, placing a disproportionate burden on the poor who spend most of their income on consumables

NAIROBI, 6 May 2008 (IRIN) – Small farmers and agricultural enterprises are the main beneficiaries of a financing partnership launched on 6 May to help them break out of poverty and commercialise farming.

“We must insulate our people from the indignity of hunger and starvation,” James Mwangi, the chief executive officer of Equity Bank, one of the partners in the deal, said in Nairobi at the launch of “Kilimo Biashara” (Commercialising Farming).

According to the Alliance for a Green Revolution in Africa (AGRA), the partnership represents an innovative solution to the farmers’ credit crunch, with the aim of boosting food security and creating jobs in rural areas.

AGRA, with Equity Bank, the International Fund for Agricultural Development (IFAD) and the Kenyan Ministry of Agriculture, signed an agreement for a loan facility of US$50 million (Ksh3 billion) to speed up financing for at least 2.5 million farmers and 15,000 agricultural enterprises across the country.

The loan facility will operate against a “cash guarantee fund” from AGRA and IFAD to reduce part of the risk of lending by Equity Bank, AGRA said.

“Farmers are the backbone of our economy; they deserve access to affordable credit that will enable them to make a profit and continue Kenya’s trajectory of growth,” Mwangi said.

Akin Adesina, AGRA vice-president in charge of policy and partnerships, read a speech on behalf of the AGRA chairman, former UN Secretary-General Kofi Annan, in which he said the government still faced many challenges despite the formation of a new cabinet.

“There are lots of internally displaced persons. Many have lost their lands and ability to produce food,” Annan said. “Vast areas of the country now experience the challenges of getting access to affordable seeds and fertilisers. Unless urgent measures are taken, food insecurity will deepen.

“The world is in the midst of a food crisis. Kenya is not exempted. The food crisis has several causes, including high energy prices, diversion of food grains to bio-fuels, climate change, and low grain reserves on the global market – the lowest it has been in several years.

“Many go hungry. Children skip meals, malnutrition is rising and real wages are falling due to the high price of food,” he said. “There is an urgent need to mitigate these impacts. Food subsidies are justified to stem the tide, but only for the short term. We need to recognise that the real cause of the food crisis in Africa is low and declining agricultural productivity.”

For a sustainable solution, he said, medium to long-term measures were needed to raise agricultural productivity in Kenya and other African countries; “that requires a green revolution“.

We need to recognise that the real cause of the food crisis in Africa is low and declining agricultural productivity

“Now is the time to have bold policies that support farmers to be able to afford farm inputs and produce food to feed granaries in Africa,” Annan said. “Now is the time for governments to implement bold pro-poor policies to achieve a green revolution – one that ensures sustainable and dramatic increases in agricultural productivity by poor farmers. Now is the time.”

Poverty strategy

President Mwai Kibaki said Kilimo Biashara was one of the government’s strategies to improve the plight of poor farmers and to help eradicate poverty.

He said the government had taken measures to improve agricultural production across the country, including reviving collapsed farmers’ institutions, doubling the budgetary allocation for the ministry of agriculture, improving agricultural extension services by providing technical and personnel assistance, as well as establishing commodity-specific grants to sectors such as coffee and tea.

Prime Minister Raila Odinga said Kenya wanted to move away from dependence on outside help with regard to food production.

“A hungry person is an angry person; we want to deal with the hunger so as to be able to comprehensively deal with the anger,” he said.

Agriculture Minister William Ruto said his ministry had identified key areas to make agriculture “profitable, commercial and competitive”: access to farm inputs; doubling the ministry’s research budget; certification of seed; and increasing farmers’ access to credit.

“If you finance agriculture, you enable farmers to produce more food; if farmers produce more food, we are likely to realise lower food costs; with lower food costs, we will be able to tame inflation; and if we tame inflation then our economy will grow.”